Page 145 - RusRPTAug24

7.1 FX issues
If the digital ruble is successfully tested its mass introduction is possible starting July 2025, Russian Central Bank Governor Elvira Nabiullina said addressing the Federation Council (upper house of the parliament). "Now I can say that if everything goes as we plan further on, with pilots implemented successfully, we will be able to shift from tests to massively introducing the digital ruble from July 2025. We target those dates, though it will be a gradual process, a gradual process of using digital rubles," she said. The Bank of Russia has been implementing a pilot project with real digital rubles since August 15, 2023. At the first stage, active operations are tested, such as opening wallets in digital rubles for banks and clients (individuals and legal entities), transferring digital rubles between clients, and payments at trade and service enterprises.
Domestic entrepreneurs doing business with China have encountered a new problem. Payments via VTB Shanghai, which is considered the flagship in the Chinese payment direction, have stopped reaching local counterparties, a source at one of the Russian banks told Vedomosti. Importers are complaining that since about June 20, payments sent to China via VTB's Shanghai branch have not reached suppliers, the source said. According to VTB Group employees, as reported by a source in another bank, the problem is caused by the process of updating the payment software. VTB has already postponed the deadline for when everything will be fine; now the bank is talking about July 15-17, the source knows. Pessimistic forecasts indicate the cessation of payments through the Chinese branch [of VTB].
About 80% of bank payments in yuan are returned back to the Russian Federation. Clients have to resort to the services of intermediaries and include additional commissions in transactions. This is reported by Kommersant, citing sources in the financial market. The publication's sources claim that payments can remain in accounts for several weeks, after which they are returned without explanation. Problems with transfers to China from Russia began in December 2023, when the United States announced secondary sanctions for banks in other countries cooperating with Russian defence industry enterprises. The situation worsened in June 2024, when the United States expanded the definition of the "military-industrial complex of the Russian Federation" to include large Russian banks.
The yuan became the dollar's most used currency in China's cross-border payments for the first time just over a year ago. In May this year, the yuan's share was already 53%, while the US dollar's share was 43%, the euro's 2% and the Hong Kong dollar's 1%, BOFIT reports.
As recently as 2019, the yuan's share was only about a quarter. The increase
145 RUSSIA Country Report August 2024 www.intellinews.com